Question

Find the rate of interest if Rs. $7000$ produces Rs. $350$ as simple interest in $2$ years.

Answer 1

Hint: We first use the general formula of simple interest where we have $A=P\left( 1+\dfrac{rn}{100} \right)$ for time in years as $n$, $r$ as rate of the bank and principal amount as $P$. We get the equation and solve to find the value of $n$.

Complete step by step answer:
We find the rate of interest if Rs. 7000 produces Rs. 350 as simple interest in 2 years. We take time in years as $n$ and $r$ as the rate of the bank. Principal amount is $P$. Now if $A$ is the final amount consisting of both principal and interest then
$A=P\left( 1+\dfrac{rn}{100} \right)$.
The interest can be defined as $I=\dfrac{Prn}{100}$.
It is given that $I=350,P=7000,n=2$.

Putting the values, we get
$350=\dfrac{7000\times 2\times r}{100}$.
We now simplify the equation.
$350=\dfrac{7000\times 2\times r}{100} \\
\Rightarrow 140r=350 \\
\Rightarrow r=\dfrac{350}{140} \\
\Rightarrow r=\dfrac{5}{2} \\
\Rightarrow r=2.5 \\ $
Therefore, the rate of interest is $2.5$ %.

Note: Simple interest paid or received over a certain period is a fixed percentage of the principal amount that was borrowed or lent. Compound interest accrues and is added to the accumulated interest of previous periods, so borrowers must pay interest on interest as well as principal.